Canada: Litigation Funding Agreements: Does The Federal Court Lack Jurisdiction To Approve Third Party Funding Agreements?

To date, there has been limited jurisprudence on whether or not third-party litigation funding agreements require court approval before an action is commenced. The recent decision of the Federal Court of Canada in Seedlings Life Science Ventures LLC v. Pfizer Canada Inc.1 ("Seedlings Life") provides some direction for commercial parties, litigators, and arbitration practitioners, on how courts may interpret the request for court approval of third-party funding of litigation costs, outside the context of class action proceedings. The Seedlings Life decision is noteworthy because in it the Federal Court held that:

  • in the context of private commercial litigation, it does not have jurisdiction to assess the legality of a litigation fund agreement unless (i) it relates to a class action properly before the Federal Court, (ii) it somehow affects the legal rights of the parties to pursue the litigation in question before the Federal Court; and
  • court approval of third party funding is strictly a matter of contract between the contracting parties and assessment of the legality of such arrangements is more properly within the jurisdiction of the Provinces' superior courts.

Facts and Background:

Seedlings Life Science Ventures ("Seedlings"), a small health care-related research and product development company, brought a patent infringement action against Pfizer Canada Inc. ("Pfizer"), a large pharmaceutical company, in the Federal Court of Canada.

Concerned about the inherent costs and risks of complex patent litigation, Seedlings entered into a Litigation Funding Agreement ("LFA") with Bentham IMF Capital Limited ("Bentham"). Bentham is the Canadian subsidiary of a professional litigation funding enterprise from Australia.

The LFA provided that Bentham would fund Seedlings' legal fees and disbursements, and in turn would be entitled to a share of the proceeds from the litigation. Further, the LFA allowed Bentham to terminate the agreement if it was no longer satisfied of the merits or commercial viability of the action.

Most notably, the enforceability of the LFA was conditional upon approval from the Federal Court. Absent this approval, Bentham could declare the LFA null and void. Seedlings and Bentham therefore made an application to the Federal Court for approval of the LFA.

Interestingly, and as an aside, Bentham also had the right to be consulted regarding potential settlements, and to access all documents produced in the course of litigation, subject to the same confidentiality and implied undertaking obligations as Seedlings.

The Federal Court's Decision:

The Federal Court maintained that its jurisdiction is statutory and cannot be presumed. It is unable to grant remedies and make final determinations of rights in matters "over which it has not been expressly granted jurisdiction by statute."2 The Court also noted that there is no precedent for it to grant such approval.

Further, the Court found that the approval sought by Seedlings and Bentham was "neither necessary nor ancillary" to the underlying litigation. As a result, the Court had no jurisdiction to enquire into the legality of the LFA or to make any determination regarding the validity or propriety of the LFA. The Court stated that:

...where the Plaintiff is asserting its own rights against the Defendant, this Court has no jurisdiction to make any determination in respect of any funding agreement to which the Plaintiff is a party, whether of the Court's own motion, at the behest of the Plaintiff or on a motion of the Defendant.3

Furthermore, the Court differentiated this motion from the procedure of approving funding agreements in the context of class proceedings. The Court maintained that the "legal, procedural and policy imperatives underlying the practice or requirement developed in Ontario and other provinces of submitting LFAs to prior court approval in class proceedings do not exist in the context of private litigation."4 As such, to the extent that Bentham required "the comfort of a court's prior determination of the enforceability or moral acceptability of the LFA before proceeding with it", it was "strictly a matter of contract between subject and subject and properly within the jurisdiction of the courts of the provinces."5

Seedlings and Bentham also argued that the Court's approval of the LFA was a matter of access to justice.6 In rejecting this argument, the Court noted that while Seedlings and Bentham chose to make their agreement contingent upon the Court's approval, the Federal Court's jurisdiction "cannot be conferred by agreement between parties."7 The Federal Court could not find any legal or logical basis to extend the requirement of pre-approval of such LFA agreements outside of class proceedings.8

Doctrine of Champerty and Maintenance Specifically:

The Court rejected the argument that it had jurisdiction through the doctrine of champerty and maintenance. The Court recognized that parties sometimes seek prior court approval to protect the funding party from the consequences of a subsequent finding that the agreement might be champertous and further, that the doctrine exists to protect against abuses of the court process.9 However, the Court held that the purpose of the doctrine of champerty and maintenance is not, and was never intended, to result in judicial approval of funding agreements becoming a condition precedent to pursuing litigation that a party is otherwise legitimately entitled to pursue.10

The Court further clarified that this was not a case where a champertous agreement went to the foundation of the actual litigation. In this respect, the Court held that the "manner in which Seedlings chooses to fund a litigation it has every right to bring is of no concern of the Court or to the Defendant because that manner does not affect the validity of the underlying rights asserted in the action."11


The legal procedure as it relates to third-party litigation funding agreements in the context of private litigation is a developing area of law. This decision provides guidance that the Federal Court does not have the jurisdiction to "approve" a litigation funding agreement outside of the context of class proceedings. The exception to this would be if the litigation funding agreement affects the entitlement of the parties to pursue the underlying litigation before the Federal Court. Absent these two circumstances, the direction from the Federal Court is that it is the Provinces' superior courts that are the more appropriate venue for parties seeking the comfort of an advance determination of the enforceability of their litigation funding agreement.12

Note however that in the event that the litigation funding agreement does affect the entitlement of the parties to pursue the underlying litigation, it appears the Federal Court may be of the view that will engage the issue of whether such a litigation funding agreement would violate the rules against champerty and maintenance. While each case is unique and strategy must be determined accordingly, counsel should bear in mind that the balance between being able to seek Federal Court approval and limiting the prospect of a litigation funding agreement contravening the rule against champerty and maintenance may be best struck in favour of avoiding the latter, and seeking advance determinations before the Provinces' superior courts, even if the subject matter of the lawsuit is otherwise before the Federal Court.

The development of this area of the law is one to watch closely as litigation funding becomes more common in the commercial disputes context. As a result, the courts will continue to grapple with where the legitimate boundaries are for such means of financing resolution, be it through conventional litigation or arbitration.

Further Reading:

  • Natalie Kolos and James Plotkin, "Guest Blog: Third Party Funding in Canada".13
  • Re 9354-9186 (formerly Bluberi Gaming Technologies Inc) and 9354-9178 (formerly Bluberi Group Inc), 2018 QCCS 1040 (including ¶74 and onwards as the court assessed and approved a litigation funding agreement that was extant in that case).


1 Seedlings Life Science Ventures LLC v Pfizer Canada Inc, 2017 FC 826, 152 CPR (4th) 319. ("Seedlings Life').

2 Seedlings Life, supra at para 6.

3 Seedlings Life, supra at para 25.

4 Seedlings Life, supra at para 16.

5 Seedlings Life, supra at para 28.

6 Seedlings Life, supra at para 26.

7 Seedlings Life, supra at para 27.

8 Seedlings Life, supra at para 16.

9 Seedlings Life, supra at paras. 8, 17-18.

10 Seedlings Life, supra at para 18.

11 Seedlings Life, supra at paras. 22-23.

12 Seedlings Life, supra at para 28.

13 Natalie Kolos and James Plotkin, "Guest Blog: Third Party Funding in Canada" (11 April 2018), McCarthy Tétrault, The International Arbitration Blog (blog), online:

To view the original article click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions